British Gas Optimistic Despite Losing Customers
Intense competition has been identified as one of the main reasons why British Gas has been losing so many customers. The rate of customers switching their energy supply from British Gas is currently at more than 90,000 per month. The massive loss of customers has caused shares in the UK’s largest supplier to fall to a fifteen-year low.
A tough year for British Gas also sees them facing a loss of £70m due to the incoming price cap.
Problems Mounting For British Gas
Additional headaches for the firm include two nuclear power stations being taken offline as well as several outages at its gas and oil stations. Such outages cause significant downtime in the facilities and thus have a significantly negative effect on the company’s performance.
A Trading Update from Centrica – parent company of British Gas – tried to maintain a positive outlook despite the recent issues. They said that they still expected to achieve their targets for 2018, set out in their February Preliminary Results report. Centrica cited unexpected outages and operational issues in Exploration and Production (E&P) as the main issues they were contending with. Extended inspections were also noted for causing problems, with competitive trading conditions again acknowledged as another major issue.
The Trading Update statement also revealed that the company intends to retain and attract customers with ‘new propositions.’
Centrica said, “Good progress is being made on introducing new propositions for customers, on delivering further cost efficiencies and in re-positioning the UK Home energy supply business in advance of the introduction of a default tariff price cap.”
British Gas Optimism Despite Share Price Fall
Centrica’s Chief Executive, Iain Conn, has witnessed Centrica share prices fall by 57% since his appointment in 2014. The share price has fallen by 18% just since July of this year. That huge drop is primarily down to the loss of 372,000 customers between July and October.
Despite these alarming figures, Mr Conn insists the financial performance of the company remains ‘resilient’. He said, “Our efficiency delivery and new customer propositions are helping to offset the effects of strong competition and regulation in energy supply. Our financial performance has remained resilient despite weaker than planned volumes from our E&P and Nuclear activities…”
Mr Conn also stated that the company’s cash generation remains strong. As to British Gas and Centrica’s plans for next year, Mr Conn continued, “Maintaining a focus on performance delivery and financial discipline and demonstrating resilient cash flows remain our objectives for 2019 and beyond, as we deal with the impact of the UK energy supply default tariff cap.”
Impact of Default Tariff Price Cap
The price cap to protect customers on default tariffs will be introduced from January 1st, 2019. British Gas has been attempting to mitigate the impact of the price cap all year. So far since January, they have managed to reduce the number of customers on default tariffs from 4.3m to 3.1m. However, the company estimates they will still suffer a £70m hit once the price cap is introduced.
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